Who Has Better Benefits?

By Eric Yoder

December 1, 1999

ebate over whether the Federal Employees Health Benefits Program is too generous or not generous enough and what should or shouldn't be done with it often is phrased in the context of how it compares with other employer-sponsored health plans. The most comprehensive recent look at the question came in an August 1998 Congressional Budget Office report comparing federal and private sector benefits overall. Based on data gathered from about 800 private firms, CBO concluded that for active employees, "the value of federal health benefits is lower than the value of those offered by the firms in the sample." That conclusion was reached after estimating a package of medical expenses for a hypothetical employee and applying the major provisions of insurance plans against those expenses to determine how much each plan would cover.

FEHBP requires enrollees to pay a larger share of the cost of health insurance than do many private-sector firms-about a fourth of the firms in the database picked up the entire cost of individual coverage and about 10 percent paid the entire cost for family coverage with up to two dependents. However, CBO noted that private firms increasingly are asking enrollees to pay a larger share of costs.

"Also, if the comparisons covered all private-sector employees, about one-third of whom have no health insurance, federal insurance would compare favorably," CBO said. "Finally, the method used for comparing employee health benefits does not capture the full value associated with the option federal employees have to pick health insurance plans best suited to their needs. Therefore, the federal benefits may actually have a higher value to employees than the comparisons suggest."

For retirees, CBO placed the value of FEHBP "well above the value of benefits offered by the private firms in the database," although it warned that the data were limited.

The FEHBP's favorable showing for retirees' benefits reflected the fact that such benefits are less common in the private sector. Only about two-thirds of the firms in the database provided health programs for retirees. If compared with all private firms, federal retiree health benefits would look even more generous, CBO said, because "well below half" of all employers provide medical benefits to retirees. In addition, offering health insurance to retirees is becoming less common among private firms, said CBO.